Independent advisory boutique Kepler Partners has highlighted 20 investment trusts that are trading at their cheapest entry point in the last decade.
In its quarterly Investment Trust Intelligence report, the firm said many investment trusts are not as cheap as they first appear based on their current discounts, when compared to historical discount levels.
Below, Investment Week reveals the 20 funds whose current valuations spell a buying opportunity, based on research conducted by Kepler Partners.
The group looked at ten years of daily discounts data and created a scale for comparison by dividing that historical period into percentiles. Those trading on the bottom decile of the trust's recorded discount history are offering the cheapest entry points.
At the top of the list, trading at their cheapest entry points in the past decade, are the Artemis Alpha Trust, North American Income Trust, Fundsmith Emerging Equities Trust, Henderson Alternative Strategies Trust and Manchester & London investment trust.
Investment trusts in 2016: Innovations, new launches and discount management
One popular trust in the list is the Personal Assets Trust, which offers investors access to the investment capabilities of Sebastian Lyon (pictured) at Troy Asset Management, of particularly interest as his open-ended Troy Trojan fund is soft-closed.
Kepler Partners' marketing director Pascal Dowling said: "Lyon's steadfast focus on capital preservation has won him ardent fans, who believe the trust - although it may have missed out on some upside - is ideal as a long term, low volatility play with a strong management team behind it.
"The trust also uses a zero discount policy to control discount volatility, and has done so with great success - seeing assets under management grow over time (the risk being that buybacks cause them to shrink), which adds to its allure for some."
JPMorgan Overseas, which is currently trading on a discount of 9.2%, is also in the top 20 list. Managed by Jeroen Huysinga since 2008, the trust's discount is far beyond the stated buyback level of 5%, making this an attractive entry point.
Dowling also highlighted the Edinburgh Dragon trust, trading on a discount of 11.6%.
He said: "This trust does not have a hard or stated discount control mechanism, but has been active in buying its own shares back in the past year, typically at just over a 10% discount.
"Whilst the trust has been a moderate performer of late relative to the benchmark and its peers, the managers have a highly credible track record with a huge depth of resource in Asia.
"We feel that their recent moderate performance is likely to be only a temporary aberration and their natural bias to quality and value will insulate them if markets continue to decline."
The British Empire trust is also among the top 20.
"On the current discount of 13.4%, by our measure it is in the zero percentile of ‘cheapness'. It has never been cheaper," Dowling said.
"Poor performance from this specialist mandate has been compounded by the widening discount, which despite an increasingly aggressive buyback programme, has continued to widen.
"The trust's underlying investments are themselves trading on wide discounts to estimated book value, and given the trust is trading on a big discount itself, there is a double ‘look-through' discount to the underlying assets of around 40%, a historic nadir."
Meanwhile, Fidelity China Special Situations investment trust, managed by Dale Nicholls, has been highlighted as a contrarian bet.
"We have confidence that when the tide turns in Asia this trust, which has a significant resource behind it in the form of Fidelity, who are fundamental stockpickers, will be well placed to prosper in that environment and - given that the trust has slipped out to such a significant discount, any upside in NAV terms will be compounded by the narrowing effect," Dowling said.
The full list of the top investment trusts offering cheap entry levels is below:
